This is a most interesting piece I found on the interweb, written by Paul Chefurka almost three years ago. Paul is happy for this article to be reproduced in full, no questions asked, and as I feel it needs to be widely read, the more internet presence it has the better, and now you DTM readers can share it too…

Paul, who is Canadian, has an interesting website chockablock full of insightful stuff you may also want to read.

Enjoy…….

Ever since the writing of Thomas Malthus in the early 1800s, and especially since Paul Ehrlich’s publication of “The Population Bomb” in 1968, there has been a lot of learned skull-scratching over what the sustainable human population of Planet Earth might “really” be over the long haul.

This question is intrinsically tied to the issue of ecological overshoot so ably described by William R. Catton Jr. in his 1980 book “Overshoot:The Ecological Basis of Revolutionary Change”. How much have we already pushed our population and consumption levels above the long-term carrying capacity of the planet?

This article outlines my current thoughts on carrying capacity and overshoot, and presents six estimates for the size of a sustainable human population.

Carrying Capacity

“Carrying capacity” is a well-known ecological term that has an obvious and fairly intuitive meaning: “The maximum population size of a species that the environment can sustain indefinitely, given the food, habitat, water and other necessities available in the environment.”

Unfortunately that definition becomes more nebulous and controversial the closer you look at it, especially when we are talking about the planetary carrying capacity for human beings. Ecologists will claim that our numbers have already well surpassed the planet’s carrying capacity, while others (notably economists and politicians…) claim we are nowhere near it yet!

This confusion may arise because we tend to confuse two very different understandings of the phrase “carrying capacity”. For this discussion I will call these the “subjective” view and the “objective” views of carrying capacity.

The subjective view is carrying capacity as seen by a member of the species in question. Rather than coming from a rational, analytical assessment of the overall situation, it is an experiential judgment. As such it tends to be limited to the population of one’s own species, as well as having a short time horizon – the current situation counts a lot more than some future possibility. The main thing that matters in this view is how many of one’s own species will be able to survive to reproduce. As long as that number continues to rise, we assume all is well – that we have not yet reached the carrying capacity of our environment.

From this subjective point of view humanity has not even reached, let alone surpassed the Earth’s overall carrying capacity – after all, our population is still growing. It’s tempting to ascribe this view mainly to neoclassical economists and politicians, but truthfully most of us tend to see things this way. In fact, all species, including humans, have this orientation, whether it is conscious or not.

Species tend to keep growing until outside factors such as disease, predators, food or other resource scarcity – or climate change – intervene. These factors define the “objective” carrying capacity of the environment. This objective view of carrying capacity is the view of an observer who adopts a position outside the species in question.It’s the typical viewpoint of an ecologist looking at the reindeer on St. Matthew Island, or at the impact of humanity on other species and its own resource base.

This is the view that is usually assumed by ecologists when they use the naked phrase “carrying capacity”, and it is an assessment that can only be arrived at through analysis and deductive reasoning. It’s the view I hold, and its implications for our future are anything but comforting.

When a species bumps up against the limits posed by the environment’s objective carrying capacity, its population begins to decline. Humanity is now at the uncomfortable point when objective observers have detected our overshoot condition, but the population as a whole has not recognized it yet. As we push harder against the limits of the planet’s objective carrying capacity, things are beginning to go wrong. More and more ordinary people are recognizing the problem as its symptoms become more obvious to casual onlookers.The problem is, of course, that we’ve already been above the planet’s carrying capacity for quite a while.

One typical rejoinder to this line of argument is that humans have “expanded our carrying capacity” through technological innovation. “Look at the Green Revolution! Malthus was just plain wrong. There are no limits to human ingenuity!” When we say things like this, we are of course speaking from a subjective viewpoint. From this experiential, human-centric point of view, we have indeed made it possible for our environment to support ever more of us. This is the only view that matters at the biological, evolutionary level, so it is hardly surprising that most of our fellow species-members are content with it.

The problem with that view is that every objective indicator of overshoot is flashing red. From the climate change and ocean acidification that flows from our smokestacks and tailpipes, through the deforestation and desertification that accompany our expansion of human agriculture and living space, to the extinctions of non-human species happening in the natural world, the planet is urgently signaling an overload condition.

Humans have an underlying urge towards growth, an immense intellectual capacity for innovation, and a biological inability to step outside our chauvinistic, anthropocentric perspective. This combination has made it inevitable that we would land ourselves and the rest of the biosphere in the current insoluble global ecological predicament.

Overshoot

When a population surpasses its carrying capacity it enters a condition known as overshoot. Because the carrying capacity is defined as the maximum population that an environment can maintain indefinitely, overshoot must by definition be temporary. Populations always decline to (or below) the carrying capacity. How long they stay in overshoot depends on how many stored resources there are to support their inflated numbers. Resources may be food, but they may also be any resource that helps maintain their numbers. For humans one of the primary resources is energy, whether it is tapped as flows (sunlight, wind, biomass) or stocks (coal, oil, gas, uranium etc.). A species usually enters overshoot when it taps a particularly rich but exhaustible stock of a resource. Like fossil fuels, for instance…

Population growth in the animal kingdom tends to follow a logistic curve. This is an S-shaped curve that starts off low when the species is first introduced to an ecosystem, at some later point rises very fast as the population becomes established, and then finally levels off as the population saturates its niche.

Humans have been pushing the envelope of our logistic curve for much of our history. Our population rose very slowly over the last couple of hundred thousand years, as we gradually developed the skills we needed in order to deal with our varied and changeable environment,particularly language, writing and arithmetic. As we developed and disseminated those skills our ability to modify our environment grew, and so did our growth rate.

If we had not discovered the stored energy stocks of fossil fuels, our logistic growth curve would probably have flattened out some time ago, and we would be well on our way to achieving a balance with the energy flows in the world around us, much like all other species do. Our numbers would have settled down to oscillate around a much lower level than today, similar to what they probably did with hunter-gatherer populations tens of thousands of years ago.

Unfortunately, our discovery of the energy potential of coal created what mathematicians and systems theorists call a “bifurcation point” or what is better known in some cases as a tipping point. This is a point at which a system diverges from one path onto another because of some influence on events. The unfortunate fact of the matter is that bifurcation points are generally irreversible. Once past such a point, the system can’t go back to a point before it.

Given the impact that fossil fuels had on the development of world civilization, their discovery was clearly such a fork in the road. Rather than flattening out politely as other species’ growth curves tend to do, ours kept on rising. And rising, and rising.

What is a sustainable population level?

Now we come to the heart of the matter. Okay, we all accept that the human race is in overshoot. But how deep into overshoot are we? What is the carrying capacity of our planet? The answers to these questions,after all, define a sustainable population.

Not surprisingly, the answers are quite hard to tease out. Various numbers have been put forward, each with its set of stated and unstated assumptions –not the least of which is the assumed standard of living (or consumption profile) of the average person. For those familiar with Ehrlich and Holdren’s I=PAT equation, if “I” represents the environmental impact of a sustainable population, then for any population value “P” there is a corresponding value for “AT”, the level of Activity and Technology that can be sustained for that population level. In other words, the higher our standard of living climbs, the lower our population level must fall in order to be sustainable. This is discussed further in an earlier article on Thermodynamic Footprints.

To get some feel for the enormous range of uncertainty in sustainability estimates we’ll look at six assessments, each of which leads to a very different outcome. We’ll start with the most optimistic one, and work our way down the scale.

The Ecological Footprint Assessment

The concept of the Ecological Footprint was developed in 1992 by William Rees and Mathis Wackernagel at the University of British Columbia in Canada.

The ecological footprint is a measure of human demand on the Earth’s ecosystems. It is a standardized measure of demand for natural capital that may be contrasted with the planet’s ecological capacity to regenerate. It represents the amount of biologically productive land and sea area necessary to supply the resources a human population consumes, and to assimilate associated waste. As it is usually published, the value is an estimate of how many planet Earths it would take to support humanity with everyone following their current lifestyle.

It has a number of fairly glaring flaws that cause it to be hyper-optimistic. The “ecological footprint” is basically for renewable resources only. It includes a theoretical but underestimated factor for non-renewable resources. It does not take into account the unfolding effects of climate change, ocean acidification or biodiversity loss (i.e. species extinctions). It is intuitively clear that no number of “extra planets” would compensate for such degradation.

Still, the estimate as of the end of 2012 is that our overall ecological footprint is about “1.7 planets”. In other words, there is at least 1.7 times too much human activity for the long-term health of this single, lonely planet. To put it yet another way, we are 70% into overshoot.

It would probably be fair to say that by this accounting method the sustainable population would be (7 / 1.7) or about four billion people at our current average level of affluence. As you will see, other assessments make this estimate seem like a happy fantasy.

The Fossil Fuel Assessment

The main accelerator of human activity over the last 150 to 200 years has been our exploitation of the planet’s stocks of fossil fuel. Before 1800 there was very little fossil fuel in general use, with most energy being derived from the flows represented by wood, wind, water, animal and human power. The following graph demonstrates the precipitous rise in fossil fuel use since then, and especially since 1950.

This information was the basis for my earlier Thermodynamic Footprint analysis. That article investigated the influence of technological energy (87% of which comes from fossil fuel stocks) on human planetary impact, in terms of how much it multiplies the effect of each “naked ape”. The following graph illustrates the multiplier at different points in history:

Fossil fuels have powered the increase in all aspects of civilization, including population growth. The “Green Revolution” in agriculture that was kicked off by Nobel laureate Norman Borlaug in the late 1940s was largely a fossil fuel phenomenon, relying on mechanization, powered irrigation and synthetic fertilizers derived from fossil fuels. This enormous increase in food production supported a swift rise in population numbers, in a classic ecological feedback loop: more food (supply) => more people (demand) => more food => more people etc…

Over the core decades of the Green Revolution from 1950 to 1980 the world population almost doubled, from fewer than 2.5 billion to over 4.5 billion. The average population growth over those three decades was 2% per year. Compare that to 0.5% from 1800 to 1900; 1.00% from 1900 to 1950; and 1.5% from 1980 until now:

This analysis makes it tempting to conclude that a sustainable population might look similar to the situation in 1800, before the Green Revolution, and before the global adoption of fossil fuels: about 1 billion people living on about 5% of today’s global average energy consumption, all of it derived from renewable energy flows.

It’s tempting (largely because it seems vaguely achievable), but unfortunately that number may still be too high. Even in 1800 the signs of human overshoot were clear, if not well recognized: there was already widespread deforestation through Europe and the Middle East; and desertification had set into the previously lush agricultural zones of North Africa and the Middle East.

Not to mention that if we did start over with “just” one billion people, an annual growth rate of a mere 0.5% would put the population back over seven billion in just 400 years. Unless the growth rate can be kept down very close to zero, such a situation is decidedly unsustainable.

The Population Density Assessment

There is another way to approach the question. If we assume that the human species was sustainable at some point in the past, what point might we choose and what conditions contributed to our apparent sustainability at that time?

I use a very strict definition of sustainability. It reads something like this: “Sustainability is the ability of a species to survive in perpetuity without damaging the planetary ecosystem in the process.” This principle applies only to a species’ own actions, rather than uncontrollable external forces like Milankovitch cycles, asteroid impacts, plate tectonics, etc.

In order to find a population that I was fairly confident met my definition of sustainability, I had to look well back in history – in fact back into Paleolithic times. The sustainability conditions I chose were: a very low population density and very low energy use, with both maintained over multiple thousands of years. I also assumed the populace would each use about as much energy as a typical hunter-gatherer: about twice the daily amount of energy a person obtains from the food they eat.

There are about 150 million square kilometers, or 60 million square miles of land on Planet Earth. However, two thirds of that area is covered by snow, mountains or deserts, or has little or no topsoil. This leaves about 50 million square kilometers (20 million square miles) that is habitable by humans without high levels of technology.

A typical population density for a non-energy-assisted society of hunter-forager-gardeners is between 1 person per square mile and 1 person per square kilometer. Because humans living this way had settled the entire planet by the time agriculture was invented 10,000 years ago, this number pegs a reasonable upper boundary for a sustainable world population in the range of 20 to 50 millionpeople.

I settled on the average of these two numbers, 35 million people. That was because it matches known hunter-forager population densities, and because those densities were maintained with virtually zero population growth (less than 0.01% per year)during the 67,000 years from the time of the Toba super-volcano eruption in 75,000 BC until 8,000 BC (Agriculture Day on Planet Earth).

If we were to spread our current population of 7 billion evenly over 50 million square kilometers, we would have an average density of 150 per square kilometer. Based just on that number, and without even considering our modern energy-driven activities, our current population is at least 250 times too big to be sustainable. To put it another way, we are now 25,000% into overshoot based on our raw population numbers alone.

As I said above, we also need to take the population’s standard of living into account. Our use of technological energy gives each of us the average planetary impact of about 20 hunter-foragers. What would the sustainable population be if each person kept their current lifestyle, which is given as an average current Thermodynamic Footprint (TF) of 20?

We can find the sustainable world population number for any level of human activity by using the I = PAT equation mentioned above.

We decided above that the maximum hunter-forager population we could accept as sustainable would be 35 million people, each with a Thermodynamic Footprint of 1.

First, we set I (the allowable total impact for our sustainable population) to 35, representing those 35 million hunter-foragers.

Next, we set AT to be the TF representing the desired average lifestyle for our population. In this case that number is 20.

We can now solve the equation for P. Using simple algebra, we know that I = P x AT is equivalent to P = I / AT. Using that form of the equation we substitute in our values, and we find that P = 35 / 20. In this case P = 1.75.

This number tells us that if we want to keep the average level of per-capita consumption we enjoy in today’s world, we would enter an overshoot situation above a global population of about 1.75 million people. By this measure our current population of 7 billion is about 4,000 times too big and active for long-term sustainability. In other words, by this measure we are we are now 400,000% into overshoot.

Using the same technique we can calculate that achieving a sustainable population with an American lifestyle (TF = 78) would permit a world population of only 650,000 people – clearly not enough to sustain a modern global civilization.

For the sake of comparison, it is estimated that the historical world population just after the dawn of agriculture in 8,000 BC was about five million, and in Year 1 was about 200 million. We crossed the upper threshold of planetary sustainability in about 2000 BC, and have been in deepening overshoot for the last 4,000 years.

The Ecological Assessments

As a species, human beings share much in common with other large mammals. We breathe, eat, move around to find food and mates, socialize, reproduce and die like all other mammalian species. Our intellect and culture, those qualities that make us uniquely human, are recent additions to our essential primate nature, at least in evolutionary terms.

Consequently it makes sense to compare our species’ performance to that of other, similar species – species that we know for sure are sustainable. I was fortunate to find the work of American marine biologist Dr. Charles W. Fowler, who has a deep interest in sustainability and the ecological conundrum posed by human beings. The following three assessments are drawn from Dr. Fowler’s work.

First assessment

In 2003, Dr. Fowler and Larry Hobbs co-wrote a paper titled, “Is humanity sustainable?” that was published by the Royal Society. In it, they compared a variety of ecological measures across 31 species including humans. The measures included biomass consumption, energy consumption, CO2 production, geographical range size, and population size.

It should come as no great surprise that in most of the comparisons humans had far greater impact than other species, even to a 99% confidence level. When it came to population size, Fowler and Hobbs found that there are over two orders of magnitude more humans than one would expect based on a comparison to other species – 190 times more, in fact. Similarly, our CO2 emissions outdid other species by a factor of 215.

Based on this research, Dr. Fowler concluded that there are about 200 times too many humans on the planet. This brings up an estimate for a sustainable population of 35 million people.

This is the same as the upper bound established above by examining hunter-gatherer population densities. The similarity of the results is not too surprising, since the hunter-gatherers of 50,000 years ago were about as close to “naked apes” as humans have been in recent history.

Second assessment

In 2008, five years after the publication cited above, Dr. Fowler wrote another paper entitled “Maximizing biodiversity, information and sustainability.” In this paper he examined the sustainability question from the point of view of maximizing biodiversity. In other words, what is the largest human population that would not reduce planetary biodiversity?

This is, of course, a very stringent test, and one that we probably failed early in our history by extirpating mega-fauna in the wake of our migrations across a number of continents.

In this paper, Dr. Fowler compared 96 different species, and again analyzed them in terms of population, CO2 emissions and consumption patterns.

This time, when the strict test of biodiversity retention was applied, the results were truly shocking, even to me. According to this measure, humans have overpopulated the Earth by almost 700 times. In order to preserve maximum biodiversity on Earth, the human population may be no more than 10 million people – each with the consumption of a Paleolithic hunter-forager.

Addendum: Third assessment

After this article was initially written, Dr. Fowler forwarded me a copy of an appendix to his 2009 book, “Systemic Management: Sustainable Human Interactions with Ecosystems and the Biosphere”, published by Oxford University Press. In it he describes yet one more technique for comparing humans with other mammalian species, this time in terms of observed population densities, total population sizes and ranges.

After carefully comparing us to various species of both herbivores and carnivores of similar body size, he draws this devastating conclusion: the human population is about 1000 times larger than expected. This is in line with the second assessment above, though about 50% more pessimistic. It puts a sustainable human population at about 7 million.

Urk!

Conclusions

As you can see, the estimates for a sustainable human population vary widely – by a factor of 500 from the highest to the lowest.

The Ecological Footprint doesn’t really seem intended as a measure of sustainability. Its main value is to give people with no exposure to ecology some sense that we are indeed over-exploiting our planet. (It also has the psychological advantage of feeling achievable with just a little work.) As a measure of sustainability, it is not helpful.

As I said above, the number suggested by the Thermodynamic Footprint or Fossil Fuel analysis isn’t very helpful either – even a population of one billion people without fossil fuels had already gone into overshoot.

That leaves us with four estimates: two at 35 million, one of 10 million, and one of 7 million.

The central number of 35 million people is confirmed by two analyses using different data and assumptions. My conclusion is that this is probably the absolutely largest human population that could be considered sustainable. The realistic but similarly unachievable number is probably more in line with the bottom two estimates, somewhere below 10 million.

I think the lowest two estimates (Fowler 2008, and Fowler 2009) are as unrealistically high as all the others in this case, primarily because human intelligence and problem-solving ability makes our destructive impact on biodiversity a foregone conclusion. After all, we drove other species to extinction 40,000 years ago, when our total population was estimated to be under 1 million.

So, what can we do with this information? It’s obvious that we will not (and probably cannot) voluntarily reduce our population by 99.5% to 99.9%. Even an involuntary reduction of this magnitude would involve enormous suffering and a very uncertain outcome. It’s close enough to zero that if Mother Nature blinked, we’d be gone.

In fact, the analysis suggests that Homo sapiens is an inherently unsustainable species. This outcome seems virtually guaranteed by our neocortex, by the very intelligence that has enabled our rise to unprecedented dominance over our planet’s biosphere. Is intelligence an evolutionary blind alley? From the singular perspective of our own species, it quite probably is. If we are to find some greater meaning or deeper future for intelligence in the universe, we may be forced to look beyond ourselves and adopt a cosmic, rather than a human, perspective.

Discussion

How do we get out of this jam?

How might we get from where we are today to a sustainable world population of 35 million or so? We should probably discard the notion of “managing” such a population decline. If we can’t even get our population to simply stop growing, an outright reduction of over 99% is simply not in the cards. People seem virtually incapable of taking these kinds of decisions in large social groups. We can decide to stop reproducing, but only as individuals or (perhaps) small groups. Without the essential broad social support, such personal choices will make precious little difference to the final outcome. Politicians will by and large not even propose an idea like “managed population decline” – not if they want to gain or remain in power, at any rate. China’s brave experiment with one-child families notwithstanding, any global population decline will be purely involuntary.

Crash?

A world population decline would (will) be triggered and fed by our civilization’s encounter with limits. These limits may show up in any area: accelerating climate change, weather extremes,shrinking food supplies, fresh water depletion, shrinking energy supplies,pandemic diseases, breakdowns in the social fabric due to excessive complexity,supply chain breakdowns, electrical grid failures, a breakdown of the international financial system, international hostilities – the list of candidates is endless, and their interactions are far too complex to predict.

In 2007, shortly after I grasped the concept and implications of Peak Oil, I wrote my first web article on population decline: Population: The Elephant in the Room. In it I sketched out the picture of a monolithic population collapse: a straight-line decline from today’s seven billion people to just one billion by the end of this century.

As time has passed I’ve become less confident in this particular dystopian vision. It now seems to me that human beings may be just a bit tougher than that. We would fight like demons to stop the slide, though we would potentially do a lot more damage to the environment in the process. We would try with all our might to cling to civilization and rebuild our former glory. Different physical, environmental and social situations around the world would result in a great diversity in regional outcomes. To put it plainly, a simple “slide to oblivion” is not in the cards for any species that could recover from the giant Toba volcanic eruption in just 75,000 years.

Or Tumble?

Still, there are those physical limits I mentioned above. They are looming ever closer, and it seems a foregone conclusion that we will begin to encounter them for real within the next decade or two. In order to draw a slightly more realistic picture of what might happen at that point, I created the following thought experiment on involuntary population decline. It’s based on the idea that our population will not simply crash, but will oscillate (tumble) down a series of stair-steps: first dropping as we puncture the limits to growth; then falling below them; then partially recovering; only to fall again; partially recover; fall; recover…

I started the scenario with a world population of 8 billion people in 2030. I assumed each full cycle of decline and partial recovery would take six generations, or 200 years. It would take three generations (100 years) to complete each decline and then three more in recovery, for a total cycle time of 200 years. I assumed each decline would take out 60% of the existing population over its hundred years, while each subsequent rise would add back only half of the lost population.

In ten full cycles – 2,000 years – we would be back to a sustainable population of about 40-50 million. The biggest drop would be in the first 100 years, from 2030 to 2130 when we would lose a net 53 million people per year. Even that is only a loss of 0.9% pa, compared to our net growth today of 1.1%, that’s easily within the realm of the conceivable,and not necessarily catastrophic – at least to begin with.

As a scenario it seems a lot more likely than a single monolithic crash from here to under a billion people. Here’s what it looks like:

It’s important to remember that this scenario is not a prediction. It’s an attempt to portray a potential path down the population hill that seems a bit more probable than a simple, “Crash! Everybody dies.”

It’s also important to remember that the decline will probably not happen anything like this, either. With climate change getting ready to push humanity down the stairs, and the strong possibility that the overall global temperature will rise by 5 or 6 degrees Celsius even before the end of that first decline cycle, our prospects do not look even this “good” from where I stand.

Rest assured, I’m not trying to present 35 million people as some kind of “population target”. It’s just part of my attempt to frame what we’re doing to the planet, in terms of what some of us see as the planetary ecosphere’s level of tolerance for our abuse.

The other potential implicit in this analysis is that if we did drop from 8 to under 1 billion, we could then enter a population free-fall. As a result, we might keep falling until we hit the bottom of Olduvai Gorge again. My numbers are an attempt to define how many people might stagger away from such a crash landing. Some people seem to believe that such an event could be manageable. I don’t share that belief for a moment. These calculations are my way of getting that message out.

I figure if I’m going to draw a line in the sand, I’m going to do it on behalf of all life, not just our way of life.

What can we do?

To be absolutely clear, after ten years of investigating what I affectionately call “The Global Clusterfuck”, I do not think it can be prevented, mitigated or managed in any way. If and when it happens, it will follow its own dynamic, and the force of events could easily make the Japanese and Andaman tsunamis seem like pleasant days at the beach.

The most effective preparations that we can make will all be done by individuals and small groups. It will be up to each of us to decide what our skills, resources and motivations call us to do. It will be different for each of us – even for people in the same neighborhood, let alone people on opposite sides of the world.

I’ve been saying for a couple of years that each of us will do whatever we think is appropriate for the circumstances, in whatever part of the world we can influence. The outcome of our actions is ultimately unforeseeable, because it depends on how the efforts of all 7 billion of us converge, co-operate and compete. The end result will be quite different from place to place – climate change impacts will vary, resources vary, social structures vary, values and belief systems are different all over the world.The best we can do is to do our best.

Here is my advice:

Stay awake to what’s happening around us.

Don’t get hung up by other people’s “shoulds and shouldn’ts”.

Occasionally re-examine our personal values. If they aren’t in alignment with what we think the world needs, change them.

Stop blaming people. Others are as much victims of the times as we are – even the CEOs and politicians.

Blame, anger and outrage is pointless. It wastes precious energy that we will need for more useful work.

Laugh a lot, at everything – including ourselves.

Hold all the world’s various beliefs and “isms” lightly, including our own.

Forgive others. Forgive ourselves. For everything.

Love everything just as deeply as you can.

That’s what I think might be helpful. If we get all that personal stuff right, then doing the physical stuff about food, water, housing,transportation, energy, politics and the rest of it will come easy – or at least a bit easier. And we will have a lot more fun doing it.

After a wonderful evening at the Geeveston twilight market in the ‘town hall’ (I’m not sure what its real status is..), I went home with a full tummy of great food made by the talented locals. I got to chat to lots of people, and strengthened relationships with a few more. I just love the community down here…… By midnight, however, the wind had really taken off from the WSW, keeping me awake. Then at maybe 2am, this unrelenting bang bang bang noise that shook the whole shed woke me up, and I eventually had to relent and get out of my warm bed to investigate what on earth was going on out there….

I found the main steel sliding door, all nine square metres of it, half hanging off its track. When the wind blew hard enough – and I later discovered that we’d had gusts of nearly 90km/hr (that’s 55MPH for you Americans reading this….) – the whole door got airborn at the bottom, eventually slamming back down against the shed, causing all that shaking. Visions of the other side also coming off its track started floating through my brain, and a weighty door sailing through the air smashing into my cars and into the neighbour’s yard flashed before my eyes.

I quickly found some ropes, and lashed the door to the shed frame, deciding that I’d attempt to fix it – which I did easily it turned out – in broad daylight. Needless to say, I didn’t get much sleep, and even though I ‘slept in’, I woke up a little exhausted, hence the day off on a rotten day……

Shame really, because I had planned to process the last tree I cut down yesterday……

This one was the biggest, or at least the fattest tree in the entire row. The way it had to fall meant danger for one of my fences which fortunately had a gate opening just where I wanted to drop it. But how to fall this monster accurately?

My new best friend Matt who lives next door gave me all the tips I needed…. careful planning he said, and attention to what you do is the way to tackle this. I’ve learned to listen to Matt now (mind you, he’s also learned to listen to me, we are fast getting good at sharing experiences and information…) and followed his instructions to the letter, which really paid off.

The drop zone

The Scarf

He said to mark a line on the ground where you want the tree to drop. Then follow that line (with paint) up the trunk, exactly in the middle. Then mark out the scarf making sure it’s dead level, ditto with the back cut……. see the pictures.

This tree was so large, Big Bertha ran out of fuel, just cutting the scarf! At first, I thought I’d killed the Chinese saw, again. The 24 inch bar completely disappeared in the wood as I cut, and later, after the tree was down, I knelt on the ground and laid my arm over the stump with its edge in my armpit…. and my fingertips were still not reaching the other side!

After doing all that, however, the tree was inches short of even reaching the fence… a good exercise for me all the same.

Now I realise far larger trees have been dropped by many more lumberjacks, but this was an experience for me. And, once again, I managed to not hurt myself, which as I keep repeating is always a bonus……

Cutting the tree down was the easy bit, now I have to process it and remove all the tangly branches and cut the crown off, and cut the trunk into two useful lengths. That’ll take me a month of Sundays to accomplish. Watch this space…..

Oh……. and did I mention the tree fell exactly where I wanted it? Thanks Matt…..

I know, it’s too early to tell what the next Northern Summer will do to the Arctic, but could this year be the one we see with an ice free North Passage? If it happens, then I for one would call it a tipping point……. lifted from Robert Scribbler’s website.

We have never seen heat like this before in the Arctic. Words whose meaning tends to blur due to the fact that, these days, such events keep happening over and over and over again.

(Climate Reanalyzer hits a stunning 7.06 C above the already hotter than normal 1979 to 2000 baseline for the entire region above the 66 North Latitude Line on February 22nd of 2016. It’s a very extreme temperature departure — one this particular analyst has never seen before in this record. For reference, a 3 C above baseline temperature departure for this region would be considered extraordinarily warm. What we see now is freakish, outlandish, odd, disturbing. Image source:Climate Reanalyzer.)

Nothing in the recent geological past can compare to the danger we are now in the process of bringing to bear upon our world. Not the Great Flood. Not the end of the last ice age. Those were comfortable, normal cataclysms. Human beings and life on this world survived them. But the kind of geophysical changes we — meaning those of us who are forcing the rest of us to keep burning fossil fuels — are inflicting upon the Earth is something entirely new. Something far, far more deadly.

To put this in perspective, a region larger than 30 million square kilometers or representing fully 6 percent of the Earth’s surface was more than 7 degrees Celsius hotter than average today. That’s an area more than three times larger than the United States including Alaska and Hawaii. A region of the world that includes a vast majority of the remaining frozen Northern Hemisphere land and sea ice. And since an extreme heatwave is typically defined as temperature departures at about 3 C above normal for an extended period of time over a large region — the Arctic appears to be experiencing some ridiculously unseasonable temperatures for this time of year.

(A seemingly unstoppable period of record warmth continues for the High Arctic on February 22nd. Readings for this zone have consistently remained in the warmest 15 percent of readings on up to record warmest readings for each day since January 1, 2016. Image source: NOAA.)

Above the 80 North Latitude line, departures were even more extreme — hitting about 13 C or about 23 F warmer than normal for the entire High Arctic surrounding the North Pole today (see above graphic). Temperatures that are more typical for late April or early May as we enter a time of year when this region of the Arctic is usually experiencing its coldest readings and sea ice extents would normally continue to build.

Unfortunately, today’s extreme heat was just an extension of amazing above average Arctic temperatures experienced there since late December. So what we are seeing is consistently severe Arctic warmth during a season that should be Winter, but that has taken on a character more similar to a typical Arctic Spring. Warmth that is now enough to have already propelled the Arctic into its warmest ever yearly temperatures when considering a count of below freezing degree days.

Looking at the above graph, what we see is an ongoing period in which Winter cold has been hollowed out by a series of warm air invasions rising up from the south. These warm wind events have tended to flow up through weaknesses in the Jet Stream that have recently begun to form over the warming Ocean zones of the Bering, Northeast Pacific, Barents, and Greenland seas. Still more recently, warm wind events have also propagated northward over Baffin Bay and Western Greenland — even shoving warm air into the ocean outlets of a typically frozen Hudson Bay.

Since thousands of meters of warming water insulates better than the land surface and diaphanous atmosphere, this added heat is distributed more evenly across the globe in the world ocean system. As such, ocean warming is a very efficient means of transferring heat to the Northern Hemisphere Pole in particular. The reason is that the Pole itself sits atop the warming and globally inter-connected Arctic Ocean. In addition, the warming surface waters, as noted above, provide pathways for warm, moist air invasions of the Arctic — especially during Winter.

For 2016, these kinds of heat transfers not only resulted in an extreme warming of airs over the Arctic, they have also shoved the Arctic sea ice into never-before-seen record lows for area and extent.

(NSIDC shows Arctic sea ice entering a new record low extent range from February 2 through February 21 of 2016. A peak on February 9 and decline since concordant with record warmth building throughout the Arctic begs the question — did the sea ice melt season start on February 9th? Possible — but too early to call for now. Image source: NSIDC.)

Off and on throughout January, but more consistently since early February of 2016, Arctic sea ice has continued to hit new daily record lows. For Arctic sea ice extent, the record lows entered a streak that has now been unbroken since February 2nd. By the 21st, extent measures had hit 14.165 million square kilometers in the National Snow and Ice Data Center measure. That’s about 200,000 square kilometers below the previous record low extent value for the date set during 2006.

Perhaps more ominously, the current measure appears to have fallen off by about 50,000 square kilometers from a peak set on February 9th. And with such extreme heat driving into the Arctic over recent days, it appears that this departure gap could widen somewhat over the coming week.

Overall, radiation balance conditions for the Arctic are starting to change as well. The long polar night in the Arctic is beginning to recede. Sunlight is beginning to fall at very low angles over the sea ice, providing it with another nudge toward melting. Finally, the greatly withdrawn ice has uncovered more dark ocean surfaces that will, in turn, absorb more sunlight as the Arctic Winter proceeds on toward Spring.

With sea ice declining slightly since February 9, with record warmth already in place in the Arctic, and with the sun slowly beginning to provide its own melt pressure, it appears risks are high that we see a record early start to Arctic melt season. Seven day forecasts do show high Arctic temperature departures receding a bit from today’s peak at around 6-7 C above average to between 4 and 5 C above average by the start of next week. But heat at the ice edge in the Bering, Barents, Greenland Sea and Baffin Bay are all likely to continue to apply strong pressure on sea ice extent and area totals. In addition, recent fracturing within the Beaufort has generated a number of low albedo zones that will face a wave of unseasonable warmth riding up over Alaska during the coming days which will tend to slow rates of refreeze even as Western Alaska’s waters feel the heat pressure of off and on above freezing temperatures.

So it appears we may have already begun, in early February a melt season that will last through mid-to-late September. It’s too early to make the call conclusively, but the Arctic heat and melt trends necessary to set up just such an ominous event do appear to be in place at this time. In other words, “all the devils are here…”

Out of the blue, another acquaintance of mine in Geeveston who actually bought a block of land I had my eye on a few years ago offered me some geese. With twenty five of them, and having problems trying to stop them flying away to greener pastures, Dave and Cassandra decided they just had too many. I on the other hand have always been a firm believer that mowers that don’t use fossil fuels are the best there are, and it was always my intention to keep geese and ducks (Muscovies in particular) to keep the grass down in the apple orchard.

Dave’s farm, one stunning morning…..

Not only do they eat lots of grass, they also produce enormous quantities of very wet poo, the ideal fertiliser for my apples. Permaculture 101, really, and eventually they reproduce supplying either eggs or meat when their numbers grow. In exchange for the free birds, I’ve spent all day having fun on Dave’s farm (which I can clearly see from our place) with Matt and his tractor, ploughing hundreds of metres of windrows in preparation for planting a windbreak of native trees. I also showed Dave how to clip wings to stop the birds from flying, and how to kill one the quick and humane way I’ve used for years with my ducks back in Queensland. All in all, a very productive day…….

wheel assembly

Because these geese seem particularly flighty, I came up with the idea of making a goose tractor. Now I had never even heard of tractoring such large birds, but looking it up on the internet, I did find it had been done before, and set out to build one with three metre long sticks of pine left over from building bedrooms in the shed….

It’s the biggest and heaviest tractor I’ve ever built. It needed real wheels, and I found some at the local hardware store for the princely sum of $43. With solid rubber tyres (that can’t go flat) and proper roller bearings to take the weight, I set about making a chassis for it incorporating the wheels at one end.

I then laid out the triangular ends on the floor of the shed, mitred the tops, and using 150mm bugle head screws, fastened the lot together. This proved unbelievably strong. In fact, the integrity of the whole structure was proven when I towed the finished tractor 250m to its starting position in the orchard…. Without breaking it!

But putting the whole spindly superstructure together outside – because I doubt it would have fitted through the shed doors – proved a little more difficult, and after getting it up on the ute’s ladder rack frame, I had to relent and ask Matt next door to come and help me turn it over for a beer…

The door is part of an aviary I picked up at the tip for five bucks, and I have enough left to now make a small tractor housing for ducklings whenever we may get those……

The homecoming

It was then covered over with bird netting, commonly used here in Tasmania to stop birds attacking fruit trees. If this netting was strong enough to contain Dave’s geese after he caught them, it would be good enough here….

The tractor now houses the new arrivals, four girls and one boy, between rows of fast growing apples, and they are hopefully settling down fast. A month from now, I’ll start letting them out one at a time to see if they call the Fanny Farm home yet, because I’m sure looking forward to the day they can free range the whole orchard.

The many problems of 2016 (including rapid moves in currencies, falling commodity prices, and loan defaults) are likely to cause large payouts of derivatives, potentially leading to the bankruptcies of financial institutions, as they did in 2008. To prevent such bankruptcies, most governments plan to move as much of the losses related to derivatives and debt defaults to private parties as possible. It is possible that this approach will lead to depositors losing what appear to be insured bank deposits.

I better spend that money quick smart. Just had a quote for $17,000 for the blocks to go into the retaining wall. By the time I’ve bought the double glazing and the roof, most of my big expenses, apart from the footings and slab, will have gone…..

What is ahead for 2016? Most people don’t realize how tightly the following are linked:

1. Growth in debt2. Growth in the economy3. Growth in cheap-to-extract energy supplies4. Inflation in the cost of producing commodities5. Growth in asset prices, such as the price of shares of stock and of farmland6. Growth in wages of non-elite workers7. Population growth

It looks to me as though this linkage is about to cause a very substantial disruption to the economy, as oil limits, as well as other energy limits, cause a rapid shift from the benevolent version of the economic supercycle to the portion of the economic supercycle reflecting contraction. Many people have talked about Peak Oil, the Limits to Growth, and the Debt Supercycle without realizing that the underlying problem is really the same–the fact the we are reaching the limits of a finite world.

There are actually a number of different kinds of limits to a finite world, all leading toward the rising cost of commodity production. I will discuss these in more detail later. In the past, the contraction phase of the supercycle seems to have been caused primarily by too high a population relative to resources. This time, depleting fossil fuels–particularly oil–plays a major role. Other limits contributing to the end of the current debt supercycle include rising pollution and depletion of resources other than fossil fuels.

The problem of reaching limits in a finite world manifests itself in an unexpected way: slowing wage growth for non-elite workers. Lower wages mean that these workers become less able to afford the output of the system. These problems first lead to commodity oversupply and very low commodity prices. Eventually these problems lead to falling asset prices and widespread debt defaults. These problems are the opposite of what many expect, namely oil shortages and high prices. This strange situation exists because the economy is a networked system. Feedback loops in a networked system don’t necessarily work in the way people expect.

I expect that the particular problem we are likely to reach in 2016 is limits to oil storage. This may happen at different times for crude oil and the various types of refined products. As storage fills, prices can be expected to drop to a very low level–less than $10 per barrel for crude oil, and correspondingly low prices for the various types of oil products, such as gasoline, diesel, and asphalt. We can then expect to face a problem with debt defaults, failing banks, and failing governments (especially of oil exporters).

The idea of a bounce back to new higher oil prices seems exceedingly unlikely, in part because of the huge overhang of supply in storage, which owners will want to sell, keeping supply high for a long time. Furthermore, the underlying cause of the problem is the failure of wages of non-elite workers to rise rapidly enough to keep up with the rising cost of commodity production, particularly oil production. Because of falling inflation-adjusted wages, non-elite workers are becoming increasingly unable to afford the output of the economic system. As non-elite workers cut back on their purchases of goods, the economy tends to contract rather than expand. Efficiencies of scale are lost, and debt becomes increasingly difficult to repay with interest. The whole system tends to collapse.

How the Economic Growth Supercycle Works, in an Ideal Situation

In an ideal situation, growth in debt tends to stimulate the economy. The availability of debt makes the purchase of high-priced goods such as factories, homes, cars, and trucks more affordable. All of these high-priced goods require the use of commodities, including energy products and metals. Thus, growing debt tends to add to the demand for commodities, and helps keep their prices higher than the cost of production, making it profitable to produce these commodities. The availability of profits encourages the extraction of an ever-greater quantity of energy supplies and other commodities.

The growing quantity of energy supplies made possible by this profitability can be used to leverage human labor to an ever-greater extent, so that workers become increasingly productive. For example, energy supplies help build roads, trucks, and machines used in factories, making workers more productive. As a result, wages tend to rise, reflecting the greater productivity of workers in the context of these new investments. Businesses find that demand for their goods and services grows because of the growing wages of workers, and governments find that they can collect increasing tax revenue. The arrangement of repaying debt with interest tends to work well in this situation. GDP grows sufficiently rapidly that the ratio of debt to GDP stays relatively flat.

Over time, the cost of commodity production tends to rise for several reasons:

1. Population tends to grow over time, so the quantity of agricultural land available per person tends to fall. Higher-priced techniques (such as irrigation, better seeds, fertilizer, pesticides, herbicides) are required to increase production per acre. Similarly, rising population gives rise to a need to produce fresh water using increasingly high-priced techniques, such as desalination.

2. Businesses tend to extract the least expensive fuels such as oil, coal, natural gas, and uranium first. They later move on to more expensive to extract fuels, when the less-expensive fuels are depleted. For example, Figure 1 shows the sharp increase in the cost of oil extraction that took place about 1999.

3. Pollution tends to become an increasing problem because the least polluting commodity sources are used first. When mitigations such as substituting renewables for fossil fuels are used, they tend to be more expensive than the products they are replacing. The leads to the higher cost of final products.

4. Overuse of resources other than fuels becomes a problem, leading to problems such as the higher cost of producing metals, deforestation, depleted fish stocks, and eroded topsoil. Some workarounds are available, but these tend to add costs as well.

As long as the cost of commodity production is rising only slowly, its increasing cost is benevolent. This increase in cost adds to inflation in the price of goods and helps inflate away prior debt, so that debt is easier to pay. It also leads to asset inflation, making the use of debt seem to be a worthwhile approach to finance future economic growth, including the growth of energy supplies. The whole system seems to work as an economic growth pump, with the rising wages of non-elite workers pushing the growth pump along.

The Big “Oops” Comes when the Price of Commodities Starts Rising Faster than Wages of Non-Elite Workers

Clearly the wages of non-elite workers need to be rising faster than commodity prices in order to push the economic growth pump along. The economic pump effect is lost when the wages of non-elite workers start falling, relative to the price of commodities. This tends to happen when the cost of commodity production begins rising rapidly, as it did for oil after 1999 (Figure 1).

The loss of the economic pump effect occurs because the rising cost of oil (or electricity, or food, or other energy products) forces workers to cut back on discretionary expenditures. This is what happened in the 2003 to 2008 period as oil prices spiked and other energy prices rose sharply. (See my article Oil Supply Limits and the Continuing Financial Crisis.) Non-elite workers found it increasingly difficult to afford expensive products such as homes, cars, and washing machines. Housing prices dropped. Debt growth slowed, leading to a sharp drop in oil prices and other commodity prices.

Figure 2. World oil supply and prices based on EIA data.

It was somewhat possible to “fix” low oil prices through the use of Quantitative Easing (QE) and the growth of debt at very low interest rates, after 2008. In fact, these very low interest rates are what encouraged the very rapid growth in the production of US crude oil, natural gas liquids, and biofuels.

Now, debt is reaching limits. Both the US and China have (in a sense) “taken their foot off the economic debt accelerator.” It doesn’t seem to make sense to encourage more use of debt, because recent very low interest rates have encouraged unwise investments. In China, more factories and homes have been built than the market can absorb. In the US, oil “liquids” production rose faster than it could be absorbed by the world market when prices were over $100 per barrel. This led to the big price drop. If it were possible to produce the additional oil for a very low price, say $20 per barrel, the world economy could probably absorb it. Such a low selling price doesn’t really “work” because of the high cost of production.

Debt is important because it can help an economy grow, as long as the total amount of debt does not become unmanageable. Thus, for a time, growing debt can offset the adverse impact of the rising cost of energy products. We know that oil prices began to rise sharply in the 1970s, and in fact other energy prices rose as well.

Figure 3. Historical World Energy Price in 2014$, from BP Statistical Review of World History 2015.

Looking at debt growth, we find that it rose rapidly, starting about the time oil prices started spiking. Former Director of the Office of Management and Budget, David Stockman, talks about “The Distastrous 40-Year Debt Supercycle,” which he believes is now ending.

Figure 4. Worldwide average inflation-adjusted annual growth rates in debt and GDP, for selected time periods. See post on debt for explanation of methodology.

In recent years, we have been reaching a situation where commodity prices have been rising faster than the wages of non-elite workers. Jobs that are available tend to be low-paid service jobs. Young people find it necessary to stay in school longer. They also find it necessary to delay marriage and postpone buying a car and home. All of these issues contribute to the falling wages of non-elite workers. Some of these individuals are, in fact, getting zero wages, because they are in school longer. Individuals who retire or voluntarily leave the work force further add to the problem of wages no longer rising sufficiently to afford the output of the system.

The US government has recently decided to raise interest rates. This further reduces the buying power of non-elite workers. We have a situation where the “economic growth pump,” created through the use of a rising quantity of cheap energy products plus rising debt, is disappearing. While homes, cars, and vacation travel are available, an increasing share of the population cannot afford them. This tends to lead to a situation where commodity prices fall below the cost of production for a wide range of types of commodities, making the production of commodities unprofitable. In such a situation, a person expects companies to cut back on production. Many defaults may occur.

China has acted as a major growth pump for the world for the last 15 years, since it joined the World Trade Organization in 2001. China’s growth is now slowing, and can be expected to slow further. Its growth was financed by a huge increase in debt. Paying back this debt is likely to be a problem.

Figure 5. Author’s illustration of problem we are now encountering.

Thus, we seem to be coming to the contraction portion of the debt supercycle. This is frightening, because if debt is contracting, asset prices (such as stock prices and the price of land) are likely to fall. Banks are likely to fail, unless they can transfer their problems to others–owners of the bank or even those with bank deposits. Governments will be affected as well, because it will become more expensive to borrow money, and because it becomes more difficult to obtain revenue through taxation. Many governments may fail as well for that reason.

The U. S. Oil Storage Problem

Oil prices began falling in the middle of 2014, so we might expect oil storage problems to start about that time, but this is not exactly the case. Supplies of US crude oil in storage didn’t start rising until about the end of 2014.

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Once crude oil supplies started rising rapidly, they increased by about 90 million barrels between December 2014 and April 2015. After April 2015, supplies dipped again, suggesting that there is some seasonality to the growing crude oil supply. The most “dangerous” time for rapidly rising amounts added to storage would seem to be between December 31 and April 30. According to the EIA, maximum crude oil storage is 551 million barrels of crude oil (considering all storage facilities). Adding another 90 million barrels of oil (similar to the run-up between Dec. 2014 and April 2015) would put the total over the 551 million barrel crude oil capacity.

Cushing, Oklahoma, is the largest storage area for crude oil. According to the EIA, maximum working storage for the facility is 73 million barrels. Oil storage at Cushing since oil prices started declining is shown in Figure 7.

Figure 7. Quantity of crude oil stored at Cushing between June 27, 2014, and June 1, 2016, based on EIA data.

Clearly the same kind of run up in oil storage that occurred between December and April one year ago cannot all be stored at Cushing, if maximum working capacity is only 73 million barrels, and the amount currently in storage is 64 million barrels.

Another way of storing oil is as finished products. Here, the run-up in storage began earlier (starting in mid-2014) and stabilized at about 65 million barrels per day above the prior year, by January 2015. Clearly, if companies can do some pre-planning, they would prefer not to refine products for which there is little market. They would rather store unneeded oil as crude, rather than as refined products.

Figure 8. Total Oil Products in Storage, based on EIA data.

EIA indicates that the total capacity for oil products is 1,549 million barrels. Thus, in theory, the amount of oil products stored can be increased by as much as 700 million barrels, assuming that the products needing to be stored and the locations where storage are available match up exactly. In practice, the amount of additional storage available is probably quite a bit less than 700 million barrels because of mismatch problems.

In theory, if companies can be persuaded to refine more products than they can sell, the amount of products that can be stored can rise significantly. Even in this case, the amount of storage is not unlimited. Even if the full 700 million barrels of storage for crude oil products is available, this corresponds to less than one million barrels a day for two years, or two million barrels a day for one year. Thus, products storage could easily be filled as well, if demand remains low.

At this point, we don’t have the mismatch between oil production and consumption fixed. In fact, both Iraq and Iran would like to increase their production, adding to the production/consumption mismatch. China’s economy seems to be stalling, keeping its oil consumption from rising as quickly as in the past, and further adding to the supply/demand mismatch problem. Figure 9 shows an approximation to our mismatch problem. As far as I can tell, the problem is still getting worse, not better.

Figure 9. Total liquids oil production and consumption, based on a combination of BP and EIA data.

There has been a lot of talk about the United States reducing its production, but the impact so far has been small, based on data from EIA’s International Energy Statistics and its December 2015 Monthly Energy Review.

Figure 10. US quarterly oil liquids production data, based on EIA’s International Energy Statistics and Monthly Energy Review.

Based on information through November from EIA’s Monthly Energy Review, total liquids production for the US for the year 2015 will be about 700,000 barrels per day higher than it was for 2014. This increase is likely greater than the increase in production by either Saudi Arabia or Iraq. Perhaps in 2016, oil production of the US will start decreasing, but so far, increases in biofuels and natural gas liquids are partly offsetting recent reductions in crude oil production. Also, even when companies are forced into bankruptcy, oil production does not necessarily stop because of the potential value of the oil to new owners.

Figure 11 shows that very high stocks of oil were a problem, way back in the 1920s. There were other similarities to today’s problems as well, including a deflating debt bubble and low commodity prices. Thus, we should not be too surprised by high oil stocks now, when oil prices are low.

Many people overlook the problems today because the US economy tends to be doing better than that of the rest of the world. The oil storage problem is really a world problem, however, reflecting a combination of low demand growth (caused by low wage growth and lack of debt growth, as the world economy hits limits) continuing supply growth (related to very low interest rates making all kinds of investment appear profitable and new production from Iraq and, in the near future, Iran). Storage on ships is increasingly being filled up and storage in Western Europe is 97% filled. Thus, the US is quite likely to see a growing need for oil storage in the year ahead, partly because there are few other places to put the oil, and partly because the gap between supply and demand has not yet been fixed.

What is Ahead for 2016?

1. Problems with a slowing world economy are likely to become more pronounced, as China’s growth problems continue, and as other commodity-producing countries such as Brazil, South Africa, and Australia experience recession. There may be rapid shifts in currencies, as countries attempt to devalue their currencies, to try to gain an advantage in world markets. Saudi Arabia may decide to devalue its currency, to get more benefit from the oil it sells.

2. Oil storage seems likely to become a problem sometime in 2016. In fact, if the run-up in oil supply is heavily front-ended to the December to April period, similar to what happened a year ago, lack of crude oil storage space could become a problem within the next three months. Oil prices could fall to $10 or below. We know that for natural gas and electricity, prices often fall below zero when the ability of the system to absorb more supply disappears. It is not clear the oil prices can fall below zero, but they can certainly fall very low. Even if we can somehow manage to escape the problem of running out of crude oil storage capacity in 2016, we could encounter storage problems of some type in 2017 or 2018.

3. Falling oil prices are likely to cause numerous problems. One is debt defaults, both for oil companies and for companies making products used by the oil industry. Another is layoffs in the oil industry. Another problem is negative inflation rates, making debt harder to repay. Still another issue is falling asset prices, such as stock prices and prices of land used to produce commodities. Part of the reason for the fall in price has to do with the falling price of the commodities produced. Also, sovereign wealth funds will need to sell securities, to have money to keep their economies going. The sale of these securities will put downward pressure on stock and bond prices.

4. Debt defaults are likely to cause major problems in 2016. As noted in the introduction, we seem to be approaching the unwinding of a debt supercycle. We can expect one company after another to fail because of low commodity prices. The problems of these failing companies can be expected to spread to the economy as a whole. Failing companies will lay off workers, reducing the quantity of wages available to buy goods made with commodities. Debt will not be fully repaid, causing problems for banks, insurance companies, and pension funds. Even electricity companies may be affected, if their suppliers go bankrupt and their customers become less able to pay their bills.
5. Governments of some oil exporters may collapse or be overthrown, if prices fall to a low level. The resulting disruption of oil exports may be welcomed, if storage is becoming an increased problem.

6. It is not clear that the complete unwind will take place in 2016, but a major piece of this unwind could take place in 2016, especially if crude oil storage fills up, pushing oil prices to less than $10 per barrel.

7. Whether or not oil storage fills up, oil prices are likely to remain very low, as the result of rising supply, barely rising demand, and no one willing to take steps to try to fix the problem. Everyone seems to think that someone else (Saudi Arabia?) can or should fix the problem. In fact, the problem is too large for Saudi Arabia to fix. The United States could in theory fix the current oil supply problem by taxing its own oil production at a confiscatory tax rate, but this seems exceedingly unlikely. Closing existing oil production before it is forced to close would guarantee future dependency on oil imports. A more likely approach would be to tax imported oil, to keep the amount imported down to a manageable level. This approach would likely cause the ire of oil exporters.

8. The many problems of 2016 (including rapid moves in currencies, falling commodity prices, and loan defaults) are likely to cause large payouts of derivatives, potentially leading to the bankruptcies of financial institutions, as they did in 2008. To prevent such bankruptcies, most governments plan to move as much of the losses related to derivatives and debt defaults to private parties as possible. It is possible that this approach will lead to depositors losing what appear to be insured bank deposits. At first, any such losses will likely be limited to amounts in excess of FDIC insurance limits. As the crisis spreads, losses could spread to other deposits. Deposits of employers may be affected as well, leading to difficulty in paying employees.

9. All in all, 2016 looks likely to be a much worse year than 2008 from a financial perspective. The problems will look similar to those that might have happened in 2008, but didn’t thanks to government intervention. This time, governments appear to be mostly out of approaches to fix the problems.

10. Two years ago, I put together the chart shown as Figure 12. It shows the production of all energy products declining rapidly after 2015. I see no reason why this forecast should be changed. Once the debt supercycle starts its contraction phase, we can expect a major reduction in both the demand and supply of all kinds of energy products.

Figure 12. Estimate of future energy production by author. Historical data based on BP adjusted to IEA groupings.

Conclusion

We are certainly entering a worrying period. We have not really understood how the economy works, so we have tended to assume we could fix one or another part of the problem. The underlying problem seems to be a problem of physics. The economy is a dissipative structure, a type of self-organizing system that forms in thermodynamically open systems. As such, it requires energy to grow. Ultimately, diminishing returns with respect to human labor–what some of us would call falling inflation-adjusted wages of non-elite workers–tends to bring economies down. Thus all economies have finite lifetimes, just as humans, animals, plants, and hurricanes do. We are in the unfortunate position of observing the end of our economy’s lifetime.

Most energy research to date has focused on the Second Law of Thermodynamics. While this is a contributing problem, this is really not the proximate cause of the impending collapse. The Second Law of Thermodynamics operates in thermodynamically closed systems, which is not precisely the issue here.

We know that historically collapses have tended to take many years. This collapse may take place more rapidly because today’s economy is dependent on international supply chains, electricity, and liquid fuels–things that previous economies were not dependent on.

It all seems to be going from bad to worse…… Basslink may not be fixed in ages due to poor weather and visibility at the bottom of the sea. The biggest electricity consumer in Tasmania, an aluminium smelter of course, is going to reduce its consumption by 10%, which means that as it uses 25% of the whole state’s consumption (aluminium is soooo sustainable!), this will only reduce total consumption by a mere 2.5%. I guess you have to start somewhere.

The Government is urging households and small businesses to be ‘prudent’ about their electricity use. Domestic electricity use accounts for 40% of Tasmania’s energy demand. Just imagine how much power could be saved if the whole place ran as efficiently as we did in Queensland?

Hydro Tasmania has more than doubled the number of diesel generators on order to 200 because Basslink may not be able to fix the undersea power cable to Victoria by the target date of March 19. The cable has been offline since December 20, forcing Hydro Tasmania to rely further on already low water storages to meet the Tassie’s energy demands; I’m also told it doesn’t really start raining here until April or May… so how low will the dams go?

I heard talk on the radio of putting a second Basslink cable across the strait, at a cost of one billion dollars. Would it not be a whole lot cheaper to reinstate a decent feed-in tariff and get Tasmanians to install more PVs on their roofs?

Tasmania’s Energy Minister Matthew Groom is, according to the media, under pressure “to resolve a hold-up on a planned wind farm in the state’s north-west.” And… West Coast Wind has approval to build a 33-turbine farm near Queenstown but has not been able to secure agreement from Hydro Tasmania to buy the power it generates.

According to Hydro Tasmania, an existing wind farm at Musselroe is generating enough energy to supply the needs of up to 50,000 homes; equivalent to the residential power needs of Burnie and Devonport combined. With Tasmania blessed with loads of wind in the roaring forties in the North West, it seems that these wind farms work very well here….. and it must surely be better than burning Victoria’s brown coal.

What sort of morons run this state? And exactly how is it that Hydro Tasmania is more interested in profits than supplying power to their customers, no matter where it comes from? Another classic example of why doing things for money instead of doing them because they are essential….. and the shit hasn’t even hit the fan quite yet, though I find it hard to not think the economic death spiral has arrived.

One billion dollars would go a very long way to instigate an energy efficiency program to lower consumption everywhere. I’ve proven how much things can be improved efficiency wise.

Many moons ago, when I was cutting my teeth on Peak Oil issues, and later economic and resource ones too, I ‘met’ this most insightful chap with real life experiences of ‘the simple life’ online through the Yahoo group called EnergyResources…. I haven’t been there for some years I just realised as I looked up a URL for you, and I have no idea whether Arthur still posts there. I guess I reached a point where I learned what I had to know, and got on with my life to deal with the future. The rest, as they say……………….

Arthur and I have reunited on FaceBook, the internet sure makes the world a small place. Anyhow, let me introduce you to Arthur Noll. The below is a slightly edited for clarity version of something he posted on FB, it’s not really meant to be an essay, but it’s interesting reading all the same. Enjoy……..

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Arthur Noll

I understand that dealing with collapse isn’t easy, and I see what is needed is a blend of new understanding and old ways of living – older than most want to think of doing.

I feel we need to have scientific expectations of the future, to start. People often think they do – scientists often think they do. But in reality I see a lot of expectations as based on imaginary things being found. That isn’t being scientific. That is dreaming. People think that because dream like things have been found in the past, this will happen again. But again, this is not scientific thinking. There is no cause and effect relationship between what was found in the past and what might be found in the future. People are having expectations that are based on a correlation of events, not a cause and effect situation. Scientists endlessly warn about confusing correlation with causation, but I’m afraid a lot of them have fallen into this trap. Expectations based on correlation, is basically superstition. And what we expect to happen in the future, should obviously have a major impact on what choices we make in the present.

Along with this, I have no respect for expectations based on mysticism. If people insist on holding to either of these expectations, superstition or mysticism, I think they are likely to find their expectations were based on nothing real, and this will be a disaster for them.

My second observation is that human beings live by teamwork and die without it. Everyone has the naked body to test their independence from social groups. If someone finds they can live independently of a group, they have no need to read further. If you can’t, I think we might want to talk about things. Social groups can work together with more or less efficiency. I’d say that surviving the results of expectations based on dreaming, is going to require the highest amount of efficiency that can be mustered. But if we consider how most large societies today are organized, with money market systems, I see huge problems with this. The basic premise of this is everyone acting as an individual player with the amount of money they can get. That automatically gives a mind set of competition, rather than cooperation. People do cooperate to make money, but people are loosely tied together with this. People can win market competition by ignoring conservation, and by paying employees less than the competition. This combination produces a race to the bottom to use up resources, dreaming that the bottom will never be reached, and strangling each other economically in the process. This looks like a ridiculous system.

Instead of this, I think people need to acknowledge they live by teamwork, give up expectations based on superstition or mysticism, give up measuring value with money markets, and use scientific measure throughout. We all have a food energy budget, for example. You must make a “profit”, of food energy returned compared to the food energy you burn. Getting that energy profit is the difference between starving, working to death, or working hand to mouth, or having enough to rest, explore, and reproduce. And along with this, though, you want a favorable food energy profit to be sustainable. It can be easy to have a good food energy profit with unsustainable resource use. That is what we have been doing.

A lot more can be said about all this, but these are the basic things I think we need to be serious about.

Lack of knowledge in the population is a problem. However, I think it goes deeper than that. I don’t think most older people know how to do what I’m talking about, any better than young people, though they may have better basic skills at some things. The question is whether food preserved is sustainable, where does the material for the candle come from, and how is garden soil kept fertile, and how are cows or other animals fed and managed?

The European model for how this was done in the past, in the US, looks like a disaster to me. People did things as individual families in a monetary system and it was inefficient and very destructive. For example, working separately like this, the ideal was that everyone planted their own garden and field crops and managed their own cow. There was zero thought of controlling their own population or fitting in with the ecology around them. Wild animals that were a problem to this system, were wiped out with commercial hunting and trapping. They had metal tools, gunpowder and guns, and steel traps. They sometimes gave domestic animals free range, and fenced crops, but with wild animals extirpated they would tend to switch to fencing their domestic animals instead of their crops. With metal tools, domestic animal power, and abundant trees or rocks, they made a lot of fence. Overall, they could, and did, apply a lot more energy to the landscape than natives without these things – but this was highly destructive.

Natives couldn’t apply so much energy, so what they did was use the energy they had, a lot more efficiently. They had communal crops and guarded them in shifts. When they became herders, they did similar things with the animals. This guarding didn’t require extirpating troublesome animals. As individual families, Europeans couldn’t keep a 24 hour guard on crops or animals. Their reaction to deer, elk, woodland bison, etc, was to kill them off for money. Their reaction to wolves and cougars and bears killing their livestock, was to kill them off. Their reaction to keeping annual crop land fertile, was to use manure from their animals. That this depleted the soil of pasture and hay fields, was ignored as it happened slowly, but in places like New England where fertility was low to begin with, farms were often simply abandoned and people moved west to find more land to ruin.

But natives weren’t considering their own population, either, nor did they have long term concerns about what slash and burn farming might be doing to soil over the long run. Their population growth with farming led them to fight with each other before Europeans came. In favorable climates and rich soil, like the Mississippi River Valley, they created a destructive civilization that collapsed, and did the same in Central and South America. I don’t have romantic ideas about what native people have been like.

Human beings look pretty much the same to me everywhere. Technology and domestic plants and animals allowing greater energy use on the environment, to take more from it to keep more children alive, has been very attractive, and to take from the environment greater amounts of energy to make more powerful weapons to fight more effectively with neighboring groups trying to also grow their population, has been a common pattern, and long term considerations of where this will end up, have been disregarded everywhere on the planet. If we stayed at the energy level of hunting and gathering, and fighting with stone age technology occasionally, this might have gone on as long as wolves and lions have done similar things. But we have gotten into arms races to take more from the environment and arms races to fight better with each other, and this threatens to exterminate us.